Exam 3 Flashcards
Price/Rate Variances Formula?
(Actual $ - Standard $) x Actual Quantity
Usage/Quantity/Efficiency Formula?
(Actual Quantity -Standard Quantity) x Standard $
When in the Flexible Budget prepared?
At the END of the period
What does the Static Budget use? What does the Flexible Budget use? (Quantity and Price)
Static Budget
- budgeted/expected Price
- budgeted/expected Quantity
Flexible Budget
- Actual Quantity
- budgeted/expected Price
You must know the ___ to prepare the Flexible Budget
Cost Behavior
How do people come up with standard costs for items in manufacturing?
- Historical Costs
- Engineering Based
Are things like normal spillage of materials, clean-up time, machine setup and downtime, etc. built into Standard Costs?
Yes
Who investigates when there is a
DM Price Variance DM Usage Variance DL Rate Variance DL Efficiency Variance Variable Manufacturing Overhead Variance
DM Price Variance
-Purchasing Department Manager
DM Usage Variance
-Production Department Manager
DL Rate Variance
-HR Department Manager
DL Efficiency Variance
-Production Department Manager
Variable Manufacturing Overhead Variance
-Various Managers
What is a Decentralized Organization?
Organization where decision-making occurs at all levels (employees, managers, directors, etc.)
Advantages and Disadvantages of Decentralized Organizations?
Advantages
- company is faster at responding
- motivates managers
- people who make the decisions actually know what’s going on
Disadvantages
- sometimes managers duplicate assets/services unknowingly
- goal congruence
- lack of coordination
What is responsibility accounting?
- accounting method within business
- large organizations are hard to account for as whole
- breaks up organization into individual segments
What are the 3 types of responsibility centers associated with the Responsibility Accounting method? Give a description of each.
Cost Centers
-manager ONLY influences costs
(EX: IT, Accounting Department, HR Department, Legal Department Managers)
Profit Centers
-manager influences Revenues and Costs
(EX: mid-level managers, sales manager, product-line manager, division managers)
Investment Centers
-manager influences Costs, Revenues, and Allocation of Resources
(EX: CEO, Division Managers)
Formula of ROI
Formula of PM
Formula of AT
ROI
(Net Operating Income / Avg. Total Assets)
PM
(Net Operating Income / Sales)
AT
(Sales / Avg. Total Assets)
___ is the income that a firm earns about its minimum rate of return
Residual Income
Formula to find Residual Income?
Net Operating Income
- Investment Charge (minimum rate of return x avg total assets)= Residual Income
